FiDi-Based Investment Firm Scammed Nearly $400 Million from Gullible Investors, Then Changed Its Name, Moved Around the Corner, and Fleeced Another $185 Million
Three principals in a financial advisory firm based at 25 Broadway have been sentenced to lengthy prison terms, and three others from the same, now-defunct company are scheduled to be sentenced in July.
The firm, StraightPath, made a specialty (or at least claimed to) of connecting investors with shares of companies that were poised to go public, but had not completed their initial public offering. Because the stock of such firms sometimes rapidly increases in value in the days or weeks following an IPO, buying prior to such an issuance (especially at a discount, which is what federal prosecutors allege the StraightPath team dangled in front of investors) is often perceived as an opportunity to earn lucrative returns.
Based on this pitch, the StraightPath founders—Michael Castillero, Brian Martinsen, and Francine Lanaia—convinced more than 2,000 investors to hand over approximately $386 million between 2017 and 2022, according to court records. From these proceeds, they paid themselves approximately $25 million each, and passed along tens of millions of dollars more to sales representatives who roped in prospective clients through “boiler-room” operations. High-pressure sales pitches lured investors with promises to secure them pre-IPO prices for companies such as Klarna, Chime, Airbnb, and SpaceX.
Much of the money taken from investors was spent “on luxury goods, houses, cars, watches, and a boat,” federal prosecutors say. In total, roughly $130 million in investor funds were misappropriated. The remaining quarter of a billion dollars appears to have been spent on actual stock purchases.
These tactics eventually attracted the attention of regulators, such as the Securities and Exchange Commission (SEC), which opened an investigation into StraightPath in 2022. This probe quickly established that Mr. Castillero and Ms. Lanaia had, years earlier, been barred from the investment business, as a result of prior (unrelated) allegations of misconduct. According to an indictment filed by federal prosecutors, this sparked a frantic campaign to conceal from investors the involvement of Mr. Castillero and Ms. Lanaia in StraightPath.
“At that point,” the indictment says, “Castillero’s interests in [StraightPath] were transferred, on paper, to Martinsen, but nevertheless Castillero continued to oversee operations as before. Castillero took further steps to conceal the nature of his involvement, including changing his email address to ‘Michael Alejandro,’ his first name and middle name. As a result of these deceptive measures, Castillero’s role, under any name or any title, was never disclosed to investors in any of the StraightPath Funds’ offering documents.”
When the trio recruited a reputable fund manager to serve as their proxy, prosecutors allege, Ms. Lanaia “regularly sent and responded to emails using [the manager’s] email account and signed documents for him using a rubber stamp bearing his signature.”
As SEC investigators probed more deeply into StraightPath’s affairs, the indictment says, “Martinsen, Castillero, and Lanaia discussed making [the fund manager] the scapegoat with the SEC, in the event the SEC identified any problems with StraightPath’s operations.” In a 2021 email to Mr. Castillero, Mr. Martinsen also bragged that Ms. Lanaia “is going to wamboosle the SEC lady tomorrow. They will talk weather for 45 minutes and the lady will forget what she’s looking for.”
The SEC representative appears not to have forgotten what she was looking for. The following spring, federal regulators and prosecutors raided StraightPath’s offices and shut the company down. In May (following a two-week jury trial last fall), Mr. Castillero, Mr. Martinsen, and Ms. Lanaia were sentenced to eleven, ten, and eight years in prison, respectively. All three were convicted of fraud and conspiracy. Mr. Castillero and Mr. Martinsen were also convicted of obstruction of justice, for their part in destroying records sought by investigators. In addition to their prison sentences, the three defendants were ordered to pay total restitution of $115 million to their victims, along with another $25 million each in forfeitures to the federal government.
Even after StraightPath was shut down in 2022, federal prosecutors allege, the fraud continued. Three associates of Mr. Castillero, Mr. Martinsen, and Ms. Lanaia simply moved their operation two blocks away to 90 Broad Street, and continued under the new name of Legend Venture Partners. Legend Venture executives Mario Gogliormella, Steven Lacaj, and Karim Ibrahim raised another $185 million from hundreds of investors, prosecutors allege, and diverted nearly $28 million to themselves, while paying sale representatives another $17 million. That office was raided in 2023, with the firm shut down a few weeks later. Mr. Gogliormella, Mr. Lacaj, and Mr. Ibrahim were indicted in June 2024, and in January of this year entered guilty pleas to conspiracy and fraud. They are scheduled to be sentenced in July.
As of January, the court-appointed receivers for StraightPath and Legend Venture Partners had recovered approximately $121 million and $14 million (respectively) in misappropriated investors funds.